Friday, March 27, 2015

N. American Railroads Caught by Speed of Crude-Oil Collapse

(Bloomberg) -- The slowdown that North American railroad
companies had been bracing for in crude oil shipments has turned
into a rout, with volumes falling faster than executives had
predicted.

With energy companies scaling back drilling after prices
for the commodity fell about 50 percent since July, industry
executives and analysts anticipated that demand for hauling
crude and extraction materials such as frac sand and pipes would
slow after a four-year surge. They didn’t expect it to slow this
much this fast.

“The impact is occurring more quickly than the rails
originally projected to investors,” said Matt Troy, an analyst
with Nomura Securities International Inc. in New York. “The
consensus view was that very high double-digit growth would
moderate to low double digits, and as we have seen in recent
weeks we’ve broken that floor and in some cases gone negative.”

Rail stocks and tank-car leasing are reflecting the
dwindling traffic. The Standard & Poor’s 500 Railroads Index is
on course for the biggest weekly decline since September 2012
and lessors’ rates for oil cars have fallen by about a third in
the last six months, Cowen & Co. said in a report on Friday.

“We would not be surprised if the downward trend continues
as long as oil prices remain depressed,” Jason Seidl, a New-York-based Cowen analyst, said in the report..... more here

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